Tackling poverty one 'baby bond' at a time

Oct. 5—Washington State Treasurer Mike Pellicciotti is touring eastern Washington this week, touting a long-term poverty reduction plan that could benefit rural communities.

Pellicciotti, a former assistant attorney general and Democratic state representative, was elected to the Treasurer's Office in 2020. He was in southeastern Washington on Monday, talking about the Washington Future Fund proposal.

Also referred to as "baby bonds," the fund would set aside about $4,000 for every baby born under Apple Health, the state's version of Medicare.

The money would be invested just like the state pension plan, allowing it to grow over time. In 20 to 30 years, when the children are between the ages of 18 and 31, they could tap the account to pay for qualified education expenses, to help provide the down payment on a house or to start their own business.

"As state treasurer, I serve on a number of boards and commissions," Pellicciotti said. "Time and time again, what I see is a lack of opportunity stemming from a lack of access to capital."

Low-income individuals may have a great idea for a small business, he said, but if they can't get a loan to cover expenses, it never gets off the ground. Similar hurdles often prevent them from going on to college, serving an apprenticeship or buying a home.

"Those barriers to entry deny people opportunities to grow and contribute to the cycle of poverty," Pellicciotti said. It also increases the need for state welfare programs, which isn't financially sustainable in the long run.

"If we're serious about righting the ship, we need to be forward-thinking," he said.

About 40,000 children are born under the Apple Care program each year. That's nearly 50% of all children born in the state. In some rural counties, it's closer to 75%.

That's why Pellicciotti views the Future Fund as a rural economic development opportunity, as much as an opportunity to help individuals rise out of poverty.

"It's a way for us to inject capital into communities that have seen a flight of capital for decades," he said.

The Legislature created a Washington Future Fund Committee earlier this year to study the proposal in greater detail. It's expected to have legislation crafted by the end of the year for consideration during the 2023 session.

The program would cost about $250 million every two years, Pellicciotti said. When he initially floated the plan earlier this year, the per-baby investment was closer to $3,200. However, he thinks the committee will recommend a $4,000 investment, which could generate as much as $25,000 per person in 20-30 years.

"That would be more impactful in changing lives," Pellicciotti said.

He noted that recipients wouldn't simply get a check for the money. It would be more like a grant, and could only be used for qualified expenditures related to education, housing or opening a business.

There would also be financial means testing at both the front end and back end, he said, to ensure that the funding went to the neediest individuals.

Pellicciotti said the Washington Future Fund has bipartisan support in the Legislature, as well as from a broad cross-section of interest groups.

"What's important is that we reserve this money now, so it's in an (investment) account and growing, rather than just spending it," he said. "The challenge will be convincing the Legislature to set it aside and put it toward a long-term purpose."

Spence may be contacted at bspence@lmtribune.com or (208) 791-9168.